HMRC has hit back at suggestions that tax amnesties, such as the deals reached recently with Switzerland and Luxembourg, could help criminals gain respectability.

Jonathan Fisher QC claimed last month in a speech to the 29^th International Symposium on Economic Crime at Jesus College, Cambridge, that the amnesties risk turning HMRC into “one of the largest money-laundering operations in history.”

Describing the Swiss agreement as a “grubby little deal”, Mr Fisher urged Parliament to intervene to prevent misguided tax amnesties being misused by organised crime.

He said: “Organised criminals set up or take over legitimate companies and predict excessive corporation tax profits for the company year. The companies pay large sums in provisional tax based on predicted profits, with these monies having been derived from criminal activity. Later, the company’s accountant approaches the tax authority to explain that profits had been far lower than anticipated and in this way obtain a tax rebate.”

“The second way in which HMRC has found itself penetrated by criminals for money laundering purposes takes place with the active encouragement and support of the Government.”

“Since 2007 HMRC has offered taxpayers a variety of different disclosure opportunities to encourage the voluntary disclosure of taxable income on hidden assets in return for beneficial tax treatment. The opportunity presented to money launderers to legitimatise the monies from their illegal activities and bring them into the financial system is colossal.”

HMRC have dismissed the claims saying they have robust measures in place to prevent fraud against the tax system.

LINK: Tax amnesties turn HMRC into “biggest money-laundering operation in history”

If you want more information then please contact Rodliffe Accounting Ltd.

HMRC have ruled that a small one person business can now invest any amount they like from their business. Great news for all, so if you want to investigate further, please let us know

IR35 Forum
The minutes of the first meeting of the Forum have now been published and amongst the basic structures, rules, etc, the Forum started to discuss the key areas:-

Segmentation
They are looking to give guidelines as to what might constitute an IR35 low, medium and high risk client.

What a job that is! How exactly are they going to decide who falls into what category?

Reviews (investigations)

In seeking to dispel the opinions of many that HMRC select at random for IR35 reviews, they actually advised that “in fact all IR35 reviews are conducted on the basis of risk assessment”.  Procedures are in place already to refer so-called high risk cases to a specialist team for potential review.

On this particular point, what then does the government expect HMRC to do differently?

How does HMRC select cases for review?

HMRC said it was not possible to publish its detailed risk criteria, but it agreed to providing greater transparency about the process.
So how transparent are HMRC willing to be? Back to the segmentation above then?

Who does reviews?

Previous by various teams around the country. In future only by specialist teams.

OK, this may help with consistency but back to segmentation again about who might actually get a review.

Another week begins and with the end of the personal tax year, it will be a busy one!

Any end of tax year planning should just be getting finished rather than just started. And all of the new rates and allowances will come into effect on Wednesday.

Meanwhile, it will now cost you 46p to send a normal letter, up a record 5p – our door is always open for personal drops off and visits rather than relying on the costly and often unreliable snail mail!

In other news I read earlier that Tesco are starting to sell used cars online – no doubt they will shake this market up (no doubt they will with banking as they gradually increase their banking offering) and it also makes you wonder what else they are looking at.

And the Olympics row over money between the British Olympic Association and the London Olympic Games Organising Committee rumbles on (any of you out there who remember the BOA chief Colin Moynihan from football ID cards in the 80s might be yawning now) …. wake up….. various IT industry figures are talking positively about the possible demand for IT contractors to help with the wide and varied IT requirements that the Games will bring not only before and during but also afterwards.

As you all know VAT will be rising from 17.5% to 20% in January 2011.

For most businesses this is just another costly exercise changing IT and pricing. It is however a good bit of news for the Contracting world on the whole

For an IT consultant for every £10,000 invoiced for before and after the rise-

The net gain before would be £222.50 and after it would be £260

Therefore the net increase in ‘free money’ would be £37.50

For a Management consultant the gains are slightly higher at -

£281 per £10,000 before and £320 per £10,000 after therefore an increase of £39

This may not sound a lot but when you consider turnover in the region of £100,000, that business would be receiving effectively free revenue of around £375-390 per annum (for doing nothing) Not bad!!

If Local Government secretary, Eric pickles, has his way, the barriers most business see now will be removed. He has recently announced that the government hopes to scrap the off-putting form-filling rules currently in place, thereby substantially increasing uptake of available tax breaks. Mr Pickles added that he intends to double the tax discounts available for Ltd Company contractors and other small business, as well as making it much easier for them to claim everything they’re eligible for.

Recognising that small businesses will play a pivotal role in helping the UK back to full recovery, Mr Pickles said that as the government rebalances the economy, it remains determined to give them all the assistance it can. If the government offers tax support to small businesses, it shouldn’t then deter people from claiming with yards of red tape.

Pickles added that he and the government wanted to see as many small business rate payers as possible claiming their tax cuts; to bring this about, changes to the rules are necessary so that local councils can administer the breaks efficiently without getting tangled in miles of superfluous government red tape. Many in the UK’s contracting community will agree with his sentiments.

It would also be nice if they realised that the increases to National Indsurance will severly hurt small businesses. 1% of any salary roll is a lot of money to find even if they have just robbed Peter (Corp tax deduction) to pay Paul (NIC increases!)

Part-time eBay traders and other small and medium enterprises may need to register with HM Revenue & Customs for self-assessment tax returns, or face new penalties that could double the tax due, the department warns.
Particularly those whose small businesses are approaching the £70,000 gross sales threshold for VAT need to tell HMRC of the fact.
Others who need to tell HMRC of the change in their circumstances include those who are renting out a property or receiving an income outside their regular jobs, or if they have sold an asset at a profit, HMRC said.

It may also include job seekers who earn income while looking for a new job, in which case they need to register as self-employed, an HMRC spokesman said.

The spokesman said timing is important. Under regulations that took effect from 1 April, taxpayers could face a penalty of up to 100% of the tax due on the undeclared income.

“The amount of the penalty will also depend on how much help you give HMRC. If you provide access to your records and help HMRC calculate what tax is due, the amount will be reduced,” the HMRC said.

But if you tell HMRC within a year of the change in your income, HMRC may cut the penalty to zero.

PCG are running a survey at the moment analysing the market of the future. So far the survey seems to suggest that Freelancers/Contractors numbers will grow by more than double in the next 10 years.

If that is the case we will have around 3,000,000 ‘non employed’ workers in the UK by 2020. This is no doubt why David Cameron and other politicians have come out to support the Contracting fraternity.

Let’s hope that the future can have some influence on the here and now, with IR35 under review by the OTS and the huge contribution contractors bring to the UK economy.

Gold is still the investment of choice for many. But what’s the best option to keep the Taxman from sharing in your profit. Should you buy Sovereigns, Krugerrands, bullion or just shares in a gold mine?

The only way is up
The bubble might burst eventually but in the meantime you might want a piece of the action, preferably without paying tax on the profit you make. The good news is that there is a way to do it.

Paper, coins or bars?
There’s more than one way to invest in gold; you could put your cash into a unit trust etc., which invests in gold mines or bullion, and let their experts trade to make a profit for you. The income you receive from this will be taxed in the same way as other company dividends or interest. And when you sell the investment, any increase in value over the purchase price of the shares/units will be taxed as a capital gain. Alternatively, you could take a more direct approach and buy gold bullion or coins; the latter offers some decent tax advantages.

If you want guidance on which funds to invest in, we can put you in touch with our Wealth Management specialists..

No income just gains
Unlike a unit trust or a mining company, chunks of gold don’t produce income, so at least you won’t have to worry about an income tax bill. But any profit you make from selling the gold will be subject to Capital Gains Tax. However, there are some special tax breaks that you can take advantage of.

Currency tax break
Where you invest in gold coins that still count as legal tender in the UK, essentially these are sovereigns minted after 1837 and various other commemorative coins, any gain you make is exempt from CGT. This makes them particularly popular with investors, so you’ll probably have to pay a little more for them compared to older UK coins, foreign gold coins or bullion.

Beware. Coins that count as currency in a country other than the UK, e.g. Krugerrands (South Africa) or American Gold Eagles (USA) don’t benefit from the CGT exemption. Instead, any profit you make is taxed as a capital gain. Gold bullion is treated in the same way (see below).

Chattel get-out
Coins, UK and foreign, which aren’t legal tender count as a “chattel”; an old fashioned word for a personal asset that can be physically touched and is moveable. The word may be outdated but the tax exemption which applies certainly isn’t. Any profit from selling a chattel is exempt from CGT providing it’s sold for no more than £6,000. And even where you sell it for more, you can claim a reduced scale chattels exemption.

Bullion trap
Gold bullion may be a tangible moveable asset but the bad news is that it doesn’t count as a chattel for tax purposes, so there’s no chance of using the special tax exemption.

Idea. Even though the chattels exemption can’t be claimed on bullion or non-currency coins, you can still deprive the Taxman of a share of your profit by only selling enough gold to keep the gain within your CGT annual exemption, currently £10,100.

Many Economists have stated that they believe Billions of £’s are hived offshore each and every year without any UK tax at all.

These funds will be moved offshore bythose who deem the UK taxes too high or too complicated.

Suggestion HMRC -

Instead of hammering the affluent, why not have a flat tax for all income of 25% for 1 year and see how much money stays in the country. If after the year tax revenue increases and tax avoidance goes down, we have a solution. If not then start hammering the wealthy for more tax.

Remember 25% of just £1 billion makes a huge contribution to the economy.